The tally of 401(k) and IRA millionaires reached a record high at Fidelity Investments in the third quarter, during a period when stocks were rocked by recession fears and trade conflict.
Investors with at least $1 million in their 401(k) accounts increased to 200,000, exceeding the previous record of 196,000 reached in the second quarter. The ranks of IRA millionaires rose to 182,400, up from the prior high of 179,900, also hit in the previous quarter.
IRAs – short for individual retirement accounts – are tax-deferred retirement plans sponsored by the government. 401(k)s are employee-sponsored retirement accounts that are funded with pretax dollars.
Despite the records, the majority of Fidelity’s 401(k) and IRA investors aren’t millionaires. Just over 1% of the 17.4 million 401(k) accounts and just under 2% of IRAs that Fidelity manages have balances near $1 million.
“People shouldn’t compare themselves to everyone,” said Jeff Winn, managing partner of International Assets Advisory, a financial firm. “Depending on your lifestyle, you could have $600,000, but be richer than someone who has $1 million.”
Retirement balances also shrunk from last quarter, Fidelity reported, even though stocks edged up during the period. The S&P 500 index gained 1.19% during the third quarter.
The average 401(k) balance decreased to $105,200 from $106,000, while the average IRA balance declined to $110,200 from $110,400 in the second quarter.
The drops largely reflect two generational trends, said Meghan Murphy, a vice president at Fidelity.
“Baby boomers who are reaching retirement had accumulated larger balances, they are starting to draw down on [them],” she said. “Masses of millennials are starting to save at this point with lower balances.”
Investors also weathered a volatile quarter without making panicked moves. While the market gyrated on recession and trade war fears – with the Dow Jones Industrial Average plummeting 800 points in one day – only 5.1% of investors touched their portfolio.
The number of workers contributing to a Roth 401(k)s increased to 1.02 million, a new record and a ten-fold jump from 109,000 in 2009. These accounts are employer-sponsored vehicles that allow you to contribute post-tax dollars for retirement.
The big benefit of Roth 401(k)s is that withdrawals are tax-free. That’s key to smart retirement planning, said Nancy Butler, founder of Above All Else, a financial advisory organization.
“You don’t want to only pull money from an account that’s 100% taxable when you retire,” Butler said. “Save in Roth IRAs or non-qualified accounts” to avoid hefty taxes in retirement.
Dhara is a writer for Yahoo Finance. Follow her on Twitter @dsinghx.